Advertising
  • News
  • Airlines
  • Finance
  • Fuel costs and currency losses erode Korean's first-half profits

Fuel costs and currency losses erode Korean's first-half profits

Korean Air has reported a massive decline in operating profit for the first half of the year, after fuel costs and foreign exchange losses eroded earnings.

Strong growth in the passenger segment offset declines in the cargo business, and the carrier posted a W6.07 trillion ($4.99 billion) operating revenue, up 0.6%.

Amid a focus on mid- to long-distance routes, capacity as measured in available seat-kilometres was raised 1.2%. Revenue passenger-kilometres grew 3%, which pushed the load factor up 1.5 percentage points to 81.4%. Passenger yield increased 1.1% and operating revenues grew 4.1% to W3.85 trillion.

Likewise, the cargo yield strengthened 1.2%, underpinned by a 2.8% increase in freight tonne-kilometres versus a 10.7% gain in revenue tonne-kilometres. Operating revenue, however, declined 9.6%. The carrier attributes this to the US-China trade row and macroeconomic conditions.

Meanwhile, operating costs rose 4.4% over the same period, nearing operating revenue at W6.02 trillion. Over the same period, fuel oil cost remained persistently high, while consumption increased by 0.7%.

This sent operating profit tumbling 82% to W47 billion, from W259 billion in the first half 2018.

Korean highlights that its debt to equity ratio increased from 707% to 835% as the result of a change in lease accounting standards plus currency effects. Compared with the first half of 2018, the won weakened against the dollar by 6.5%.

Looking ahead, the carrier expects its joint venture with Delta to boost demand from the Americas and Southeast Asian regions. Separately, it is moving in on the following new markets: Clark in the Philippines, Amman in Jordan, and Cairo in Egypt. Korean is also looking to increase the number of business-class seats on mid- and short-distance routes.

For its cargo business, Korean plans to divert capacity from markets affected by US-China tensions, with an eye on entering alternative or developing markets. It is targeting project-cargo demand, while intends to keep pricing and operations flexible in order to boost profitability.

As at 30 June 2019, the carrier's current assets and cash equivalents stood at W3.53 trillion, up 1.2% from last year.

It has 146 passenger aircraft in its fleet – 105 widebodies and 41 narrowbodies – having added two Boeing 777, one 787-9 and one Airbus A220, while phasing out one 737, between January and June 2019. Its freighter fleet remains unchanged at 23.

Advertising
Related Content
Advertising
What's Happening Around "Korean Air"